The ThinCats IF ISA will apply the tax-free ISA wrapper to its existing offerings which the firm says have delivered average returns, after losses, of 9% a year for the past five years.

Investors will be able to transfer cash from their existing ISAs into the ThinCats IF ISA.

ThinCats said it would retain its ‘auction approach’ allowing customers to select their own ISA investments and bid for the interest rates they want to earn.

The auction approach was first invented by P2P lender Zopa and ThinCats is one of few platforms to use such a method.

It allows each lender to select how much they wish to lend and they then pick the interest rates they want to earn. A lending syndicate is made up from the lowest interest rate bids and every successful lender gets the interest rates they bid.

Demand for product but needs FCA authorisation

A survey of ThinCats members revealed strong demand for the ISA product – 98% plan to take advantage of the scheme, while 68% said they’ll be committing their full ISA allowance (£15,240).

Innovative finance ISA products from all P2P lenders are currently awaiting Financial Conduct Authority (FCA) authorisation.

Kevin Caley, founder and chairman of ThinCats, said: “2016 is going to be a landmark year for the peer to peer industry. The huge influx of ISA money will more than double the size of the market within a few months and make this unique asset class a must-have component of any well balanced investment portfolio.

“Growth at such a rate is a serious but welcome challenge for the peer to peer sector and will require careful management to maintain loan quality and platform stability. The ThinCats ISA will be available to all UK taxpayers, but existing ThinCats members will be given priority if demand is very high.”

Innovative Finance ISAs: what you need to know

• This new type of ISA launches in April 2016 and means peer-to-peer investments will be able to be saved within a tax wrapper.
• RateSetter was the first provider to release details of its IF ISA, closely followed by Zopa and others are expected to announce plans ahead of the April 2016 launch date.
• Peer-to-peer lenders still do not fall under the Financial Services Compensation Scheme (FSCS), which protects your money in the event a firm goes bust.

What is peer-to-peer lending?

• Peer to peer lending platforms such as RateSetter, Zopa and Funding Circle, match savers who lend money with individuals and businesses who borrow money, cutting out the middle men such as banks.
• The relatively high rates of interest available have made them a popular choice for savers.
• Peer-to-peer lenders lent more than £2.2bn in 2015, according to latest figures from the sector’s industry body, The Peer-to-Peer Finance Association (P2PFA).

Peer to peer lending: where should I start and what are the risks?